For most Australians, whether owning or renting their home, the provision of housing for themselves and their families involves substantial expenditure throughout most of their lives. Housing costs are often the largest regular expenses to be met from a household's current income.

The regular housing costs reported in this publication cover housing-related mortgage payments, rates payments (general and water) and rent payments. The data presented are compiled from the Survey of Income and Housing (SIH), with information for the years 1994-95 to 2007-08 (excluding 1998-99, 2001-02, 2004-05 and 2006-07, when the survey was not conducted).

In 2007-08 there were approximately 20.6 million people, or 8.1 million households, living in private dwellings in Australia, up 17% on the number of people in private dwellings in 1994-95. There was a larger increase in the number of households over this period (up 23%), reflecting a decrease in the average household size from 2.69 to 2.56 persons per household. The average dwelling size increased over this period from 2.88 to 3.07 bedrooms per dwelling.

1 Average number of persons and bedrooms, 1994-95 to 2007-08

The proportion of Australian households that own their own home with or without a mortgage has ranged between 68% and 71% over the period from 1994-95 to 2007-08. Over this period there was a decrease in the proportion of households that owned their dwelling outright, from 42% in 1994-95 to 33% in 2007-08. There were increases in the proportion of households that owned their dwelling with a mortgage (from 30% to 35%) and in the proportion of households that were renting privately (from 18% to 24%). The decline in outright home ownership may, in part, reflect increasing uptake of flexible low-cost financing options which allow households to extend their existing home mortgages for purposes other than the original home purchase.

2 Housing Tenure, 1994-95 to 2007-08

Life cycle stages

A typical life cycle includes childhood, early adulthood and the forming and maturing of families. As people progress through different life cycle stages and their family structures and financial situations change, so do their housing needs and preferences. The life cycle stages used in this publication provide a simplified view of life cycle possibilities, as illustrated in tables 15 and 16. Some household types, such as lone persons aged 35-64 years, are not included in this sequential analysis.

The tenure of a household is strongly related to life cycle stages, generally following a pattern of renting in early adulthood, moving to home purchase and mortgages as partnerships are formed and children are born, and owning a home outright in older age. Only 4% of lone person and 2% of couple only households with the reference person aged under 35 years owned their home outright, compared to 69% of lone persons aged 65 and over and 86% of couples with the reference person aged 65 years and over (see table 16).

3 Housing tenure, Owners, selected life cycle groups, 2007-08

Younger persons in a couple relationship were more likely to move into home ownership than younger single people, with 46% of younger couple households owning their home with or without a mortgage. When couples have children they are more likely than younger couple only households to own a home. For couples with dependent children only and their eldest child under 5 years, 69% owned their home with or without a mortgage. This rose to 75% for couples with their eldest child aged 5 to 14, and to 84% for couples with their eldest child aged 15 to 24.

Lone person and couple only households with the reference person aged under 35 years were most likely of all life cycle groups to be renting from private landlords (62% and 50% respectively). People in these households are generally more mobile. Many are studying or starting their careers, and are likely to be on lower incomes and have lower reserves of wealth than at later stages in their lives.

One parent households with dependent children were more likely to be renting (60%) than to own their home (38%), and they were the life cycle group most likely to be renting through a state or territory housing authority (16%).

4 HOUSING TENURE, Renters, selected life cycle groups, 2007-08

HOUSING UTILISATION

The Canadian National Occupancy Standard is widely used internationally as an indicator of housing utilisation (see paragraphs 24 to 26 of the Explanatory Notes). Only 2.6% of Australian households were assessed as needing one or more extra bedrooms to meet this occupancy standard. More than three quarters (77%) of households occupied dwellings which had more bedrooms than were needed to accommodate the occupants according to the standards (see table 14).

Households who owned their home without a mortgage were more likely than those with other tenures to have one or more bedrooms spare (90%). Households renting from a state or territory housing authority were the most likely tenure group (50%) to have only the required number of bedrooms. Five percent of private renters and six percent of state or territory housing authority renters required one or more additional bedrooms.

5 Housing Utilisation, Tenure and landlord type, 2007-08

Sixty-five percent of couples living with dependent children had at least one spare bedroom, compared to 47% of one parent households with dependent children. Of the latter group, 8% required one or more additional bedrooms. Multiple family households were the most likely to require additional bedrooms (28%). On average, dwellings for couples with dependent and non-dependent children contained the highest number of bedrooms (3.9) and housed an average of 4.8 people.

HOUSING COSTS

In this publication, housing costs are defined as the sum of: rent payments; rate payments (water and general); and mortgage or unsecured loan payments, if the initial purpose of the loan was primarily to buy, add, or alter the dwelling. Owners that have a mortgage where the purpose of the mortgage, when initially taken out, was not primarily housing related, are categorised as owners with a mortgage, but their mortgage repayments are not included in their housing costs.

The mean (average) weekly housing costs for all households was $216 in 2007-08. There is, however, considerable variation in housing costs with 42% of all households paying $75 or less per week.

For owners without a mortgage, the average weekly housing costs were $33, which represented 2% of average gross weekly income for those households. Owners with a mortgage paid an average of $384 per week on housing costs, which represented 18% of their average gross weekly income, although about 32% of this amount was repaying the principal outstanding on the loan.

Households renting from private landlords paid an average of $267 per week, representing 18% of their average gross income. Households renting from state and territory housing authorities paid an average of $105 per week, representing 19% of their average gross income.

The effect of Commonwealth Rent Assistance (CRA) should be taken into consideration when comparing the housing costs of private renters to those of other households. Eligible social security recipients may receive a non-taxable income supplement in the form of CRA if the private rent they pay is above a threshold level. It is estimated that CRA effectively lowers the total housing costs by 10% for all private renters. See paragraph 16 of the Explanatory Notes for more detail.

Changes since 1994-95

Between 1994-95 and 2007-08, owners with a mortgage experienced a $112 (or 41%) increase in average weekly housing costs, after adjustment for inflation. For other tenure types, the changes were smaller with an overall increase of $68 (or 34%) for private renters and $17 (or 19%) for public renters.

For private renters, the changes in costs over the 13 years to 2007-08 represented a small decline in the proportion of income spent on housing costs, from 20% to 18% - but for public renters it represented an increase in the proportion of income spent on housing costs compared to 1994-95, from 17% to 19%. As noted above, the effect of CRA receipts should be taken into consideration when making comparisons of housing costs of private renters with those of other tenure types.

Lower income households are defined in this publication as those containing the 30% of people with equivalised disposable household income between the 10th and 40th percentiles.

Although this group reported lower housing costs, on average, than all households, their housing costs represented a greater proportion of their gross weekly income. Lower income owners with a mortgage paid an average of $281 a week in housing costs, which represented 27% of their gross weekly income, while all owners with a mortgage paid an average of $384, or 18% of their gross weekly income, on housing costs (see table 5).

Similarly, lower income households renting from private landlords paid an average of $236 a week on housing costs, which represented 28% of their gross weekly income, while all private renters paid an average of $267, or 18% of their gross weekly income, on housing costs.

As a proportion of gross household income, housing costs of lower income owners with a mortgage declined from 27% in 1994-95 to 24% in 1999-00 before rising to 27% in 2007-08.

Housing costs as a proportion of income for lower income private renters fell from 34% in 1994-95 to 30% in 2000-01 and 28% in 2007-08.

7 Housing costs as a proportion of gross income, Lower income households, 1994-95 to 2007-08 (a)

States and territories

Mean housing costs were higher in the capital cities of Australia than in the rest of the states and territories. The differences between regions often reflect differences in property values, rental prices, urban settlement and tenure patterns. The greatest difference was in New South Wales, with Sydney housing costs 88% higher than the rest of the state. In contrast, Brisbane housing costs were only 19% higher than the rest of Queensland, which had the highest non-capital city housing costs in Australia. This is influenced by Queensland's high level of urban settlement outside of Brisbane.

8 Average weekly housing costs, States and territories, 2007-08

VALUE OF DWELLING

In the SIH, owners were asked to estimate the value of their dwelling. The estimate they provided may differ from valuations made by accredited valuers or the actual sale price of the dwelling. The extent of the difference has not been measured and therefore some care needs to be taken when using these data.

In 2007-08 the median value of the 5.5 million owner occupied dwellings was $400,000, an increase of 8% on the CPI adjusted value of $372,000 in 2005-06, and a 102% increase on the corresponding value in 1994-95 (see table 1). The CPI adjusted value of the median mortgage outstanding increased by 6% between 2005-06 and 2007-08 (from $142,000 to $150,000), and by 88% between 1994-95 and 2007-08.

Dwelling values were highest for couple with dependent children only households, where the eldest child was 15 to 24 years (see table 19). The median value of dwellings for this group was $481,000. The life cycle group that reported the lowest median value of dwellings was lone person households under the age of 35 years. The median value for this group was $270,000.

The median value of dwellings in Australian capital cities was $450,000 in 2007-08 (see table 26). The median value was highest in Sydney at $550,000 followed by Perth at $520,000. Hobart had the lowest median value, at $310,000.

9 Value of dwelling, Capital cities, 2007-08

RECENT HOME BUYERS

More than 980,000 households purchased their dwelling in the three years prior to the 2007-08 survey. These households are divided into first home buyers (32%) and changeover buyers (68%). Most first home buyers were young households with a reference person aged under 35 years (64%). Less than 10% of first home buyer households had a reference person aged 45 years and over. In contrast, more than half (53%) of changeover buyer households had a reference person aged 45 years and over.

10 Age of reference person, Recent home buyer households, 2007-08

The median value of recently purchased dwellings was $350,000 for first home buyers and $420,000 for changeover buyers (see table 34). Average housing costs, on the other hand, were higher for first home buyers than for changeover buyers, at $471 and $365 per week respectively (see table 32). This is consistent with a higher proportion of first home buyers having a mortgage (92%) than for changeover buyers (72%).

New dwellings purchased by recent home buyers had a higher median value ($450,000) than established dwellings purchased by recent home buyers ($380,000). Similarly, average weekly housing costs for recent home buyers were higher for those who purchased new dwellings ($427) than for those who purchased established dwellings ($395).